Startup City

Never mind the rust. Young tech companies are hot in Cleveland, where creating a startup has never been easier.

The grassroots accelerator, run by scrappy cofounders Todd Goldstein and Dar Caldwell, has so far invested in more than 40 companies, including social networking aggregation company Widdle and visual presentation platform Quick2Launch.

Goldstein and Caldwell, both in their 30s, started LaunchHouse a few years ago to keep startups from leaving town. They offer cheap space, mentoring and early-stage funding.

"There was no one focused on young entrepreneurs," says Goldstein. "We figured we were either going to get up and leave Cleveland like everyone else, or we were going to bring support to early stage companies. We wanted to connect them to relationships."

The hallmark of LaunchHouse is that it's open to anyone with an idea and a laptop. The for-profit incubator and accelerator hosts dozens of free events, throws open its doors once a month for flexible Fridays and lets entrepreneurs rent a desk for $100 a month.

Goldstein and Caldwell have come a long way since their first office above a pizza shop in University Heights. This summer, they'll accept 10 new companies in their accelerator program, which awards $20,000 to startups and helps them to validate ideas and seek funding. The accelerator is funded by a grant from Ohio Third Frontier's ONE Fund (Ohio's New Entrepreneurs).

"We have to show entrepreneurs that this is a great place to start a company," argues Goldstein. "Once they come out of here, we help them get the next round of funding."

LaunchHouse is just one example. Across Northeast Ohio, there has never been more support for entrepreneurs: from university business plan competitions, to a wealth of nonprofits that offer money and support, to a range of incubators and accelerators.

The latter are the newest startup trend. Bizdom, LaunchHouse and newbie FlashStarts—housed at PlayhouseSquare and run by serial entrepreneur Charles Stack—promise to help get new companies to "fail quickly and move on to success," says Goldstein.

"This is not just about building companies, but building an entrepreneurial community."

FlashStarts has provided $20,000 to 10 teams of entrepreneurs this summer to help them get their idea off the ground. In return, companies give up eight-percent equity.

The community also includes Bizdom, which has invested in 16 companies (four from other cities) and created 36 full-time jobs. "We're in a sleepy office building located next to a deteriorating mall," says Allen of the nonprofit's 7,000-square-foot offices on West Huron Road next to Tower City. "Yet people walk in and say, 'Hey, this looks cool.'"

The seed of an idea

What's notable about the tech scene in Cleveland is that after so many years of pining after legacy industries—steel being one of them—the city is beginning to embrace the notion that startup companies in new, burgeoning industries are the key to job creation.

A big part of that sea change is providing seed funding to help entrepreneurs get going. Laura Bennett of Embrace Pet Insurance is an example of someone who benefited from the region's increased focus on aiding startups. She raised $250,000 from Jumpstart in 2004 and has since grown her fledgling company to 38 employees, most in Cleveland.